NT dollar, won lead peers in decline

COMPETITION:An analyst said that the strong greenback is hurting Asian currencies, with regional central banks intervening in a bid to sustain exporters’ competitiveness

Bloomberg

The New Taiwan dollar and the won led declines in Asian currencies this week, on the back of speculation that the US Federal Reserve will further cut its stimulus as the US economy improves.

The Bloomberg-JPMorgan Asia Dollar Index snapped a two-week advance, as data showed that companies in the world’s largest economy last month added the most workers since November 2012 and jobless claims declined.

“Asian currencies are bearing some of the brunt of the [US] dollar[’s] strength that is being brought about by better US data,” said Sim Moh Siong, a foreign exchange strategist at Bank of Singapore Ltd.

The NT dollar posted a fifth weekly drop amid speculation that the central bank intervened to keep exporters competitive with South Korea and Japan, while the won had its biggest five-day loss since the period ended on Dec. 20 last year, due to concerns that a weak yen will hurt South Korea’s exports.

Taiwan’s dollar fell 0.6 percent this week to NT$30.212, compared with NT$30.039 on Jan. 3, while the won depreciated 0.6 percent to 1,061.38 per US dollar in Seoul, data compiled by Bloomberg show.

The Taiwanese currency dropped to a six-month low of NT$30.35 on Monday, amid speculation that the central bank intervened to keep exporters competitive with South Korean and Japanese companies.

Shipments from Taiwan, which make up about 60 percent of the economy, shrank 1.9 percent last month from a year earlier, an official report this week said. That compares with growth of 7.1 percent in South Korea, while figures from Japan show that exports increased 18.4 percent in November last year.

In Taipei, global investors bought US$174 million more local stocks than they sold this week, exchange data show.

“Funds seem to be entering Taiwan now, but the currency has dropped a lot, so I tend to think it was the result of central bank intervention,” said Andrew Tsai (蔡清雲), a Taipei-based economist at KGI Securities.

If the won keeps depreciating, the NT dollar will follow, he added.

The won’s decline this week — which saw it drop the most in six months on Monday — was driven by speculation that the Bank of Korea would cut borrowing costs due to the weaker yen’s threat to exporters. Still, policymakers kept the benchmark rate steady on Thursday.

Bank of Korea Governor Kim Choong-soo said that while Asia’s fourth-largest economy is growing near its potential, the yen may hurt its automobile, steel and machinery industries. The won gained 7 percent in the past six months against the US dollar, while the yen lost 5 percent, prices compiled by Bloomberg show.

South Korea will act against “herd behavior” and try to stabilize markets, South Korean Vice Minister of Finance Choo Kyung-ho said in Seoul on Friday.

In Beijing, the yuan touched a 20-year high on Friday, after the People’s Bank of China raised the currency’s reference rate and as figures showing faster import growth boosted optimism that local demand is starting to recover.

The Chinese central bank strengthened the yuan’s fixing by 0.17 percent — the most in two weeks — to 6.1008 per US dollar.

The yuan traded 0.05 percent higher at 6.0521 per US dollar on Friday in Shanghai, little changed from 6.0515 at the end of last week, China Foreign Exchange Trade System prices show.